Stocks rebound after day’s dive; Dow rises 1,173
Virus efforts, Biden’s surge buoy health sector, insurers
Shares on Wall Street rose Wednesday, bouncing back from a steep drop the day before, as investors responded to Joe Biden’s strong showing in the Democratic Party’s primaries and increased efforts by governments and central banks around the globe to fight the coronavirus outbreak.
Although the spreading coronavirus and its effect on global economic growth has dominated financial headlines for the past two weeks, Wall Street also has worried about Biden’s rival, Sen. Bernie Sanders. Sanders plans to take on banks and tax stock and bond trades, and he aims to eliminate most private health insurance as part of a single-payer health care plan.
Health care stocks led the gains Wednesday, rising more than 5%. Shares of insurers like UnitedHealth Group and Anthem Health were each up more than 10%.
“The strong result by Joe Biden in the Democratic primaries last night are a significant positive development for the market,” Marko Kolanovic, a strategist at JPMorgan Chase, wrote in a note to clients.
The S&P 500 rose 126.75 points, or 4.2%, to 3,130.12. The benchmark index has had five days in the past two weeks where it swung by more than 3%. In all of last year, it had just one.
The Dow gained 1,173.45 points, to 27,090.86. The Nasdaq climbed 334 points, or 3.8%, to 9,018.09. The index, which is heavily weighted with technology companies, now has a slight gain for the year.
The Russell 2000 index of smaller company stocks rose 45.11 points, or 3%, to 1,531.20.
The gains more than recouped the market’s big losses from a day earlier as Wall Street’s wild, virus-fueled swings extend into a third week.
Some measures of fear in the market eased. Treasury yields rose but were still near record lows in a sign that the bond market remains concerned about the economic pain possible from the fast-spreading virus.
The yield on the 10-year Treasury note rose to 1.06% from 1.01% late Tuesday after earlier dipping back below 1%. Yields tend to rise with expectations for the economy and inflation. Shorter-term yields fell as traders increased bets for more rate cuts from the Fed. The two-year Treasury yield fell to 0.69% from 0.71%.
Stocks rose sharply from the get-go and accelerat- ed around midday after House and Senate leadership reached a deal on a bipartisan $8.3 billion bill to battle the coronavirus outbreak. The measure’s funds would go toward research into a vaccine, improved tests and drugs to treat infected people.
The International Monetary Fund said Wednesday that it would provide $50 billion in emergency funding, including no-interest loans, to help poorer countries respond to the epidemic.
The World Health Organization said Tuesday that covid-19, the disease caused by the virus, has killed about 3.4% of those diagnosed with the illness — a higher rate than estimated previously. On Wednesday, the number of new coronavirus deaths reported outside China exceeded those reported inside the country — the center of the outbreak — for the first time.
Financial markets have been on a roller coaster for the past two weeks as investors grapple with the potential economic damage caused by fractured supply chains, travel bans and the disruption of daily life caused by the virus.
There is little clarity about how long it will take governments and health officials to contain the virus, leading to a gloomy prognosis for global economic growth.
On Tuesday, the Federal Reserve validated those concerns by announcing an emergency cut in interest rates. The Fed’s move spooked investors rather than calmed them and stocks fell nearly 3% Tuesday.
Even though many investors say they know lower interest rates will not halt the spread of the virus, they want to see central banks and other authorities do what they can to lessen the damage.
“Monetary policy can only take us so far, but at least it’s a step,” said Jack Ablin, chief investment officer at Cresset. “Investors will take comfort in coordinated central bank action. I take comfort in knowing this isn’t the plague, we’ll eventually get through this.”
Canada’s central bank cut rates on Wednesday, also by half a percentage point and citing the virus’s effect.
The Bank of England has a meeting on March 26 on interest rates. The European Central Bank and others around the world have already cut rates below zero, meanwhile, which limits their monetary policy firepower. But economists say they could make other moves, such as freeing up banks to lend more.
Data reports released Wednesday painted a U.S. economy that was still holding up, at least as of last month. The country’s services industries grew at a faster rate last month than economists expected, according to a report from the Institute for Supply Management. Hiring at private employers was stronger than expected in February, according to a report from payroll processor ADP, though slower than January’s pace.
Health care stocks in the S&P 500 jumped 5.8% for the biggest gain among the 11 sectors that make up the index. UnitedHealth Group jumped 10.7%, Cigna climbed 10.7%, and Anthem soared 15.6%, the biggest gainer in the S&P 500.
In commodities trading, benchmark crude oil fell 40 cents to settle at $46.78 a barrel. Brent crude oil, the international standard, dropped 73 cents to close at $51.13 a barrel. Wholesale gasoline rose 3 cents to $1.56 per gallon. Heating oil was unchanged at $1.53 per gallon. Natural gas rose 3 cents to $1.83 per 1,000 cubic feet.
Gold fell $1.40 to $1,643 per ounce, silver rose 6 cents to $17.25 per ounce and copper rose 1 cent to $2.59 per pound.
The dollar rose to 107.33 Japanese yen from 107.24 yen on Tuesday. The euro weakened to $1.1139 from $1.1176.
At a news conference Wednesday at the U.S. Chamber of Commerce in Washington, representatives of the airline, hotel, retail and travel industry warned that an overreaction to the spreading coronavirus could slow the economy.
Many industries are facing the prospect of falling revenue as more Americans choose to curtail their exposure to stores, airports and other public spaces.
“Our message is very simple,” said Thomas Donohue, chief executive officer of the chamber. “Be safe; if you don’t feel well, stay home. Otherwise, let’s go to work.”
Chip Rogers, president of the American Hotel & Lodging Association, urged Americans not to put off their spring break travel plans out of fear.
“There is no place in the United States right now that is not safe to travel,” he said.
Roger Dow, president of the U.S. Travel Association, went so far as to say that the government should stimulate travel.
“The smartest thing someone can do is book their travel now, because this thing isn’t going to last,” he said.
The head of the International Monetary Fund warned Wednesday that the economic fallout of the coronavirus would be more “dire” than previously thought and said that uncertainty would remain until policymakers could more clearly assess the duration of the outbreak.
The fund said in late February that it was reducing its 2020 global growth forecast by 0.1 percentage point to 3.2%, with a more dramatic slowdown in China weighing on the global economy.
“We have unfortunately seen a shift towards a more adverse scenario for the global economy,” Kristalina Georgieva, managing director of the fund, said at a briefing Wednesday.